Retail market looking more attractive to foreign firms

International experts have reported the actual income per capita in Viet Nam is much higher than official reports suggest, which comes as good news for foreign retailers seeking investment opportunities.

According to a recent report made by international auditing consultation company KPMG, annual income per capita in Viet Nam may be 25 percent higher than initial data suggested if undeclared wealth estimates are included. Originally, annual income was said to be around 800 USD for 2007. Now auditors estimate that average incomes in large urban areas such as Ha Noi and Ho Chi Minh City may be double that amount.

Total disposable income is increasing by around 2 billion USD per year, to reach 30 billion USD by the end of 2007, the report said.

The report partly explained why the country’s total retail sales currently accounts for 43.5 percent of nominal GDP, higher than the figures of 35 percent and 33 percent in China and Thailand, respectively.

KPMG said the increasing number of youth with high incomes will play a major role in helping the retail market to leap forward. Growth of retail sales is strong at 12 percent to 16 percent since 2003.

KPMG singled out the sales of personal-care and household products as boasting the highest growth rates since 2000. Clothing, footwear, cosmetics and perfume sales have all averaged between 11 and 14 percent year-on-year-growth in volume, while the figure for pharmaceuticals has been 13 percent.

Experts said that with the appearance of foreign retail giants in the country, domestic consumers will benefit as new retailers will provide access to quality goods at reasonable prices.

Moreover, new distribution regulations will also allow domestic producers, who are sub-contractors for foreign distributors, to sell their products directly in local markets. Currently, made-in-Viet Nam products, which are churned out according to foreign ordering contracts, must be exported before re-importing to sell to local consumers. Therefore, under the current regulations, local consumers have to pay double what other countries pay for the same products.

Experts said Viet Nam ’s admission to the World Trade Organisation will open doors for retailers. Under the country’s WTO pledges, import taxes imposed on consumer goods will be reduced by 5-10 percent.

Foreign investors will also access the domestic retail market with greater ease, as entirely foreign investor groups are allowed to set up their own businesses in the country’s retail industry as of January 1, 2009.

Realising the market’s great potential, existing foreign retailers including Espace Bourbon Group, Parkson, and Metro Cash and Carry are expanding their retail chains in order to maintain or enlarge market share. This month, Metro Cash and Carry opened its eighth store in the country, while Parkson reportedly intends to have 10 stores by 2009.

Other world leading retailers Tesco, Wal-Mart and Carrefour have mapped out plants to enter the market soon.

source: http://www.vnagency.com.vn/Home/EN/tabid/119/itemid/215384/Default.aspx